Prime Minister Jacinda Ardern has called on banks making record profits in the billions of dollars amid a cost-of-living crisis to assess their “social licence to operate”.
National say they support the rhetoric but not the lack of action, saying commercial banks should be investigated as part of a broader inquiry into monetary policy through the pandemic. The Green Party meanwhile say it is further evidence a tax on excess profits - “windfall tax” - is needed.
Ardern spoke as today Westpac posted after-tax profits of over $1 billion, and last week ANZ $2.4b.
According to the Reserve Bank, in the 12 months to June New Zealand’s 27 banking companies posted before-tax profits of $9.7b; on track to pass the $10b mark next quarter for the first time. This was up from $7.1b in the 12 months to June 2021.
Ardern, speaking this afternoon at her weekly post-Cabinet press conference, said the banks knew this was a time when New Zealanders were facing cost increases.
“Are they demonstrating social licence and commitment to the communities by taking the profits that they are?
“This is not a one-off. We’ve seen them consistently taking record profits.”
Asked if there was something wrong with banks making record profits as the country deals with a cost-of-living crisis, Ardern said: “Yes.”
National Party finance spokeswoman Nicola Willis said she agreed, but herself called on the Prime Minister to “take action”.
“I am deeply uncomfortable about commercial banks making record profits at a time New Zealanders are struggling with a record cost of living. It’s not right, but it’s not enough for the Prime Minister to just talk about it, she has to take action.”
Willis reiterated a call for an independent inquiry into monetary policy over the past two years and how that could have contributed to commercial bank profits. She declined to name any subsequent actions saying the “first step” was to understand if there had been “excessive profits” made.
The Green Party, which also supports an inquiry into the Covid-19 economic response, recently called for a “windfall tax” to be applied to sectors - including banks - making record profits of late due to high inflation fuelled by the pandemic, energy crisis and Russia’s invasion of Ukraine.
Under their proposal, the money raised would then support people struggling with the cost-of-living crisis.
Such a tax has been introduced for energy companies in the United Kingdom as they profit off rising oil and gas prices due to the disruption caused by Russia’s invasion of Ukraine. Margaret Thatcher’s government also brought in a windfall tax specifically on banks in 1981.
Finance spokeswoman Julie Anne Genter said if left to banks their profits would only end up in the pockets of bank executives and shareholders and not used to “help people make ends meet”.
She said an excess profits, or windfall, tax was the “simplest and most effective” way to make sure banks were paying their fair share.
Asked about a windfall tax, Ardern said there was no particular policy the Government had looked into.
She said the windfall tax in the UK had applied to energy companies over a specific rise in profits.
With banks, it was not a “one-off”.
“We’ve seen them consistently taking record profits.”
She said the Government did not have any current policy to address the issue nor could she confirm if it was working on one.
“But I do share a view as someone that takes a perspective on behalf of the welfare of all New Zealanders that what we’ve seen, I don’t think is justifiable.”
The banks must reflect on their profits and whether it was appropriate, Ardern said.
Pressed on the fact the Government’s coffers too had increased as a result of bank profits, collecting $2.7b in tax in the year to June (up from $2b the year preceding).
Ardern said the Government doesn’t have a Commerce Commission market study like the one for the grocery sector, which showed supermarkets were taking excess profits of $1 million a day.
Ardern wouldn’t answer if the Commerce Commission needs to probe the banking sector.
The PM said the point she’s making is that not all solutions to these issues come solely from the Government - and the banks making these profits can help.
Speaking on the cost of living, Ardern said the Government is focused on looking at ways to support New Zealanders.
Ardern said the weekend’s announcement on free childcare would reach nearly half of New Zealand families accessing early childhood education (ECE). It is one of the biggest cost-of-living pressures Kiwi families faced.
“We already have 20 hours of ECE free for kids aged 3 and up,” Ardern said, adding the Government also recognises childcare is still a significant expense for families.
“In this environment right now, which New Zealand is not alone in experiencing ... we have taken a broad mix of measures to try to reach as many people as we can.
“We keep looking for ways to support New Zealanders as we can.”
Labour’s policy focused on people with the lowest incomes while National’s tax cuts would give more money to the most wealthy, she said.
Ardern also held off on any commitments around the fuel excise tax reduction of 25 cents a litre. The cuts, estimated to cost the Government close to $100m a month, are due to expire in January.
Asked if they’d extend it, Ardern said they’d “make those decisions closer to the time”.
Ardern confirmed she has not spoken to new Twitter owner Elon Musk since he took over Twitter and said it was too early to say whether his purchase of the site would impact the Christchurch call.
She has not given consideration to whether she will pay for a blue tick on Twitter.
She said it is fair to say that the blue tick, which previously was accessible by high-profile people, does assist with the issue of fake accounts.
On the final of the Women’s Rugby World Cup on Saturday, Ardern expressed her pride in the team.
“They are the kind of role models” every parent would like for their kids, Ardern said.
Ardern said she may miss the match as she is going to the East Asia Summit, but she is seeing if she will be able to do both.
Ardern revealed there are no referendums currently planned for the next election.
When asked about her wedding, which had to be postponed due to the Omicron outbreak, Ardern said “we’ve got nothing scheduled”.
She said there had been a number of things on their plate, including a financial crisis.
Today’s press conference comes after a meeting of Cabinet today, and follows a recent poll that had her party in dire straits and pointing to a National-Act government come 2023.
The Newshub-Reid Research poll on Sunday had Labour down 5.9 points to 32.3 per cent. National was steady at 40.7 per cent and with Act at 10 per cent had enough support to take power together in next year’s election.
Ardern also fell to 29.9 per cent as preferred Prime Minister, a 6.9 per cent drop from the last poll. She remained well ahead of National’s Christopher Luxon on 21.5 per cent.
In response, Ardern has pointed out Labour has come back from worse results before to win an election. She also said Labour’s own polls showed the two major parties neck and neck.
Over the weekend Ardern also announced a new policy to boost childcare support for low-middle-income families. The $189 million package was part of Labour’s attempt to ease the cost-of-living pressure.
Ardern also announced what the increases to Working for Families tax credits will be from April next year, after they are adjusted for inflation - increases expected to cost about $26 million.
Throughout the conference the party also took aim at National’s plan to lower taxes, especially its plan to cut the top tax rate, which they say will increase inflation further.
Ardern said the support through childcare subsidies and Working for Families was a way to target those who needed it most, without having a significant impact on inflation.
Luxon meanwhile said while the policy was “fine” it would not address the core issue of inflation.
Luxon said a “proper economic plan” was required, removing immigration bottlenecks and disciplined spending.
Ardern could also face questions about her absence from this year’s COP, short for Conference of the Parties, the United Nations’ annual climate change conference in Sharm el-Sheikh, Egypt.
As world leaders assemble there Ardern is notably absent - the fourth time she has not attended as leader of the country.
The National Party has been critical of this, noting former prime minister John Key attended twice.
A spokesman for the Prime Minister said Ardern was attending the upcoming Apec and East Asia Summit meetings in November and it “would not have been possible to include COP in Egypt in that travel”.
He said internationally this year Ardern had raised climate change in her speech to the United Nations, at the Pacific Islands Forum and in her White House meeting with Biden.
He added New Zealand prime ministers have not “routinely attended COP meetings” and this time Shaw would be representing the country.
Experts meanwhile defended the Prime Minister, stating while “disappointing” and a missed opportunity to promote recent work in agricultural emissions, this conference was more focused on working out technical details.
Climate Change Minister James Shaw is scheduled to leave for the conference this Friday.
Two embassy staff and their families were evacuated from Iran this morning amid the conflict with Israel. Video / Mark Mitchell